Buying precious metals as an investment

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I am thinking of starting an investment club, I was going to start it a few years ago with stocks and shares but thought sod it, way to complicated and hard to manage in what shares to buy blah blah.

so I have come up with a new solution. no pratting around, just buying the yellow stuff from a gold dealer and keep it at the bank. my plan is about an ounce each week, any who wants to join me drop me a pm.

I should likely stick some disclaimer on this that gold prices could go up or down...

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Yeah, I was going to mention it could be worth using this site. Thanks to the joys of Facebook, I found out that mate of mine from a few years back stopped coding AI fraud systems and set this thing up with a couple of others several years ago.

I doubt that mentioning my name you would get any discount though!

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I like that my gold on BV is my property (if really true, this means BV offers more safety than a bank in case of bankruptcy):

For as long as you own it your gold remains your outright property, stored in specialist facilities reserved exclusively for BullionVault clients and run by accredited professional vault operators who are wholly independent of BullionVault. You choose the storage location :- London, New York or Zurich.

What I don't like is that they send me unencrypted email notifications about gold transactions I made.

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2) I prefer funds of mining stocks as I don't have the time to cherry-pick a few mining stocks. Have a look at Tocqueville Gold ( MUTF:TGLDX ). Don't look at the charts because google.finance isn't properly re-invest the dividends for you.

But look at their total-return performace figures:

1 year 14.49%

3 year annualized 29.32%

5 year annualized 23.69%

Not too shabby.

However, if you still want bullion, I suggest GLD a gold tracker ETF traded on the NYSE.

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It's toppy. Way toppy. As is evidenced by Front page financial press stories about it's inherent value. Those with memories longer than goldfish will remember similar stories in the FT and other financials in December about black gold, and the resultant chatter. Oil is off over 10% since then.

Gold is also a negative yielding asset (costs to keep, as opposed to bonds with coupon, and stocks which (generally) provides divs), which means you need a good reason to want to go buy it.

I have recently taken the other side. I have the trade on via a UK bookie who credits my account with interest daily based on the cash amount equiv of Gold I am short. for that I place 10% margin on account with them. Gold will be up and down like a whore's drawers until the general market finds direction so ideal for trading, but I would rather do it from the short side right now.

My View. Long is wrong, but if you have to be, then at least do it via futures (preferably synthetically via a UK spread better). Easier to trade in & out and gambling winnings are tax free in the UK.

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Mining stocks are more likely than gold itself to track their national indexes. If you think the euro will fall against the loonie or the rand, you could try mining stocks as a currency play (not recommended).

If you wouldn't buy debt when bond prices are high and equities when stock prices are high, why buy commodities or commodity-derived financial instruments when their prices are also high? Buy gold or gold-linked investments when no one is worried about inflation and you aren't overweight on other inflation hedges such as real estate and other hard assets.

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Here's a quick rule of thumb: If something really is a good long term investment, people don't continue to post on message boards about their short term profits. They shut up, and very contently pour more of their own money into it and retire rich.

Pyramid schemes, on the other hand, do have people who behave this way. This is basically what gold is, since it has no intrinsic value, you have to continue to convince other people it does.